Article

Economic interventions sometimes justified, but Tories must remember government has limitations

18 May 2017

Responding to the launch of the Conservative Party’s manifesto, Stephen Martin, Director General at the Institute of Directors, said:

“This is a manifesto which seeks to reach into all areas of the economy, and does not shy away from breaking with the previous Government. In some places this is justified. The business rates system is hopelessly outdated, so we support the announcement of a wholesale review, and more frequent revaluation. There is also need to adapt tax and employment law so they can keep up with changes to the economy, including gig working, so it is sensible for the Conservatives to promise to respond to the finding of the Taylor Review.

“In other areas, such as greater powers to pause mergers and annual votes for shareholders on executive pay, businesses will worry that interventions will disrupt the normal flow of commerce. The IoD believes in high standards of corporate governance, but there has to be a balance between sensible reform and the risk of hampering a company’s ability to make nimble commercial decisions. Similarly, interventions in the labour market must be handled delicately, with trade-offs for businesses. Any new employment regulations must be consulted on in depth to ensure that they do not have unintended consequences.

“The manifesto states that the Party does not believe in ‘untrammelled free markets’, but they must also recognise that governments have limitations.

On tax and spending

“IoD members will welcome the commitment to keeping corporation tax down. In an election campaign where the stubborn presence of the UK’s deficit has been largely ignored, the Conservative Party also deserves some credit for loosening the pensions triple-lock, but a commitment to a balanced budget by the ‘mid-2020s’ – after the next election - suggests that this particular can has been kicked down the road again.”

On immigration

“This is the third Tory manifesto in a row to include the “tens of thousands” net migration target and yet this year will be the seventh in succession in which it has not been met. Combined with the increased migrant skills charge and higher salary thresholds for migrants, this area of the manifesto comes as a huge disappointment to UK businesses.

“There is a need to raise the skills of the British workforce, and the education and training systems certainly need reform, but with the UK at full employment, there is simply no way that the need for foreign workers will vanish. We have been promised a ‘Global Britain’ after Brexit, but these policies are pulling in the opposite direction.”

On Brexit and trade

“Further details on the Conservatives’ plans for Brexit are welcome, although we will need to see a full list of negotiating priorities soon after the election, from whoever wins. Businesses will appreciate the certainty on funds currently in the European Investment Fund being transferred to the British Business Bank. The commitment to boosting UK exporters by reconvening the Board of Trade and creating a network of Trade Commissioners will also be supported by companies.”

On funds for investment and innovation

“The promise of new funds, from a sovereign wealth fund to university spin-off pots and more, indicates that the Government seeks to become more engaged in the market. Expanding the Seed Enterprise Investment Scheme and doing more to commercialise our best innovations will be welcomed by businesses, but the new government must resist the urge to pick winners.”

On energy

“It is pleasing to see that the Conservatives remain committed to shale, which is a resource that needs to be developed. An independent commission on ways to make energy affordable is also a good idea, but it would have been better to wait for the outcome before pledging a tariff cap.”